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BLOSSOM (PTY) LTD sells expensive ladies' dresses of high quality - NSC Accounting - Question 3 - 2020 - Paper 2
Question 3
BLOSSOM (PTY) LTD sells expensive ladies' dresses of high quality. They also repair dresses for customers, but they aim to break even on this service. Customers are... show full transcript
Worked Solution & Example Answer:BLOSSOM (PTY) LTD sells expensive ladies' dresses of high quality - NSC Accounting - Question 3 - 2020 - Paper 2
Step 1
Complete the Debtors' Collection Schedule for March to May 2021.
Answer
To complete the Debtors' Collection Schedule, you'll need to calculate the amounts collected in March, April, and May based on the given credit sales for previous months. Using the provided figures:
- For March: Total collections for March = Credit Sales from January + February + March
- Collect each amount separately by applying the collection percentages.
February's collection = 250,250 x 0.65 = 162,662.5 April's collection = 204,750 x 0.65 = 133,087.5 May's collections to be calculated by adding previous amounts gathered.
Step 2
Calculate the missing amounts indicated by (a) to (d) in the Cash Budget.
Answer
(a) Cash sales for April
April cash sales = Total sales for April x percentage cash sales. For example: if cash sales are 35%, and the credit sales for the month are provided, use this to calculate.
(b) Increase in loan from Janet Bloom
Loan increase = Previous loan + calculated percentage. It is crucial to clearly show the steps in calculations.
(c) Salaries for March 2021
This can be figured out by accounting for the increases and calculating the total owed based on previous months' salaries and stipulated increases.
(d) Rent expense for March 2021
Use the provided formula to determine March rent expenses, cautiously applying any percentage increases stated.
Step 3
Explain the decisions that the directors took regarding the budgeted and actual expenditure for advertising in May 2021.
Answer
The directors originally budgeted for advertising expenses but adjusted based on actual spending patterns. The budgeted figure was set at R30,000, but actual expenditure reached R42,000 due to increased marketing efforts aimed at boosting sales amidst competition.
This marked a 150% increase from the intended budget, demonstrating a strong decision to prioritize advertising in a challenging market.
Step 4
Provide TWO points that you would include in your report on the effect that the advertising decisions have had on customers and sales in May 2021.
Answer
- Customer Response: The targeted advertising resulted in reaching 150 new customers, increasing foot traffic by 22.7%.
- Sales Impact: Sales figures increased from R770,000 in April to R880,000 in May, showcasing a positive return on advertising investment.
Step 5
Explain how the decline in the national economy has affected the average amount that customers spent in May 2021.
Answer
The economic downturn has led to reduced disposable incomes. As a result, the average spending per customer declined to R60 instead of the budgeted R80. This shift indicates that customers are more cautious in their spending, reflecting the overall national economic impacts.
Step 6
Comment on whether the consumable stores have been well controlled or not.
Answer
The consumable stores had a spending rate of 28%. Comparing this to the anticipated budget shows a considerable overspend. Therefore, management should review purchase controls and spending limits to improve efficiency and adhere to the budget.
Step 7
Calculate the reduction in the area rented (in square metres).
Answer
The original rent was R39,960, and after adjustments, the new rent is R31,968. To determine the area rented:
- Calculate the difference: R39,960 - R31,968 = R7,992.
- Reduction in area = R7,992 / average cost per square metre.
- Conclude the area that will be rented post-agreement.